Potential signal:
- I think this is a pair that might be setting up for a significant bounce.
- If we can break above the 1.76 handle, I think you have a situation where this pair could rally all the way to the 1.81 level over the longer term.
- I would have a stop loss near the 1.7
The euro has been choppy against the New Zealand dollar during the early hours on Thursday, as we are testing a major support level. Keep in mind that this is a pair that features to major currencies, although it is considered to be a “minor market.” After all, there isn’t a huge amount of trade between the European Union and New Zealand, but this is a good pair to trade the idea of risk appetite.
Top Regulated Brokers
The reason I say this is that although neither one of these currencies of course are considered to be “safety currency”, the idea is that the euro is considered to be more “mainstream”, therefore it can often perform better against some of the emerging market currencies and of course the antipodes when there is a lot of concern out there. All things being equal, we are in an environment that has seen the European Central Bank start cutting rates, and while there is an interest rate differential that favors New Zealand, it’s not necessarily the entire story.
Despite the fact that you do get paid to be short of this market, the reality is that we are approaching a significant support level. Furthermore, we have seen a little bit of a bounce, and the Stochastic Oscillator suggest that we have gotten to a point where we have been oversold and are starting to try to correct the situation.
Technical Analysis
Looking at this chart, the 1.74 level has been an area of support previously, as we have bounced from there a couple of different times. The Stochastic Oscillator of course is rising from an oversold condition, and of course market memory comes into the picture here as well. The question now is whether or not the interest rate differential, which is roughly 1.25% at the moment, is enough to continue to push this pair lower. I don’t think so, because quite frankly Europe has a lot of issues, and although you would think that the euro would be a victim of this, the reality is that New Zealand dollar is a much “riskier currency” in the sense that it is highly sensitive to Asian and of course commodities.
If we do rally from here, the 50-Day EMA could be a bit of a target, but I would like to see this pair break above the shooting star/inverted hammer from a couple of sessions ago to start buying.
Ready to trade our free trading signals? We’ve made a list of the top 10 forex brokers in the world for you to check out.